Preamble

The House met at Eleven of the Clock, Mr. SPEAKER in the Chair.

PRIVATE BUSINESS.

London Midland and Scottish Railway Bill.

To be read the Third time upon Thursday next.

Bradford Extension Bill,

As amended, to be considered upon Monday next.

DEBTS CLEARING OFFICES AND IMPORT RESTRICTIONS ACT, 1934.

CLEARING OFFICE (ITALY) AMENDMENT ORDER, 1938.

11.5 a.m.

The Parliamentary Secretary to the Board of Trade (Captain Euan Wallace): I beg to move,
That the Clearing Office (Italy) Amendment Order, 1938, dated the twenty-eighth day of March, nineteen hundred and thirty-eight, made by the Treasury under the Debts Clearing Offices and Import Restrictions Act, 1934, a copy of which was presented to this House on the thirtieth day of March, nineteen hundred and thirty-eight, be approved.
The House will appreciate that this is an Amendment Order made under Sections 1 and 3 of the Debts Clearing Offices and Import Restrictions Act, 1934, and that, in accordance with that Act, this Order, which came into force a few days ago has to be approved by a Resolution of the House within 28 days. I do not imagine that the House will wish me to go back very far into the history of our financial arrangements with Italy, and it may meet the point if I say that in July, 1936, when the sanctions policy was terminated, there were considerable arrears of trade debts owing to United Kingdom creditors in respect of goods imported into Italy before sanctions were imposed. An Anglo-Italian Clearing Office was set up, and in November, 1936, an agreement was signed with the Italian Government which provided for the distribution of the sterling received by the clearing. That arrangement was that 70 per cent. should be devoted to current trade debts, 3 per cent. to the transfer of financial remittances, and the remaining 27 per cent. to the transfer of commercial arrears. This agreement has worked well, and the allocation of sterling to commercial arrears has been sufficient to clear off practically all the trade debts which were outstanding when the agreement was signed. Would that all clearings were as successful!

Mr. Benson: What was the date of that agreement? Was it the original agreement, just after sanctions were withdrawn?

Captain Wallace: It is the original agreement to which this is an amendment. Nearly all of these debts have been cleared off, and it became necessary,

therefore, a few weeks ago, to reallocate the 27 per cent. of sterling received from the clearing which was devoted to commercial arrears. We opened negotiations for the revision of the agreement in February of this year, and those negotiations came to fruition in an agreement signed on 18th March, which appears in the Schedule to this Order. Under the new agreement the allocation of payments in respect of current trade is increased from 70 per cent. to 87 per cent., and this will be divided between two separate sub-accounts; 46 per cent. will go in payment for the f.o.b. price of United Kingdom coal sent to Italy, and the other 41 per cent. for other United Kingdom goods, and freights other than coal freights.
It is a satisfactory result of the agreement that it gives scope for an increase of our export trade with Italy, and particularly of our export of coal. If the sterling receipts of the clearing office for this year, 1938, amount to £7,000,000—and last year approximately £6,500,000 was collected—it will enable coal to be exported to Italy to a total f.o.b. value of nearly £3,250,000. If these expectations are fulfilled—and there is no reason to think that a clearing of £6,500,000 last year will not produce £7,000,000 this year—the value of our coal export to Italy in 1938 will exceed the value of our coal export in 1937 by nearly £1,000,000, and will amount to about 80 per cent. of the value of our coal export to Italy in 1934. Moreover, payments for other exports and freights will be able to be made to an amount of over £2,800,000.
In addition to this, the agreement provides for an increase of the allocation for financial transfers from 3 per cent. to 6½ per cent., and the remaining 6½ per cent. is allocated in the first place to the transfer of any old trade debts which remain, any balance not required for that purpose being placed at the free disposal of the Italian Foreign Exchange Institute. The Italian Government have undertaken to transfer payments for freight and insurance on United Kingdom coal exports to Italy partly out of this free allocation and partly by providing sterling from; sources other than the clearing. The requirements for this freight and insurance on United Kingdom coal exported to Italy will, of course, depend


on the amount of coal exported and on the fluctuations of the freight market, but we calculate that these requirements can hardly be less in the current year than £900,000, or, in other words, some 13 per cent. of the figure of £7,000,000 which was given as a measure of the probable sterling receipts from the clearing for 1938. The House will observe, therefore, that in actual practice these two amounts of 6½ per cent. which I have mentioned will in any case be devoted to financial transfers and to providing sterling for the transport and insurance of coal exported to Italy. Provision is also made in the notes annexed to the agreement for the settlement within six months of the old trade debts due from Italy to Burma, Newfoundland and the Colonial Empire.
There is one point to which perhaps I should draw attention, in order, I hope, to forestall criticism. That is the point which may be made that this clearing agreement to which I hope the House is going to give its approval means in some way the granting of credits to Italy. In fact, as my right hon. Friend the Secretary to the Department of Overseas Trade said in answer to a Question in the House the other day, it does not mean anything of the kind. It is purely a machinery arrangement to the advantage of both countries for transferring payments between them. Payments for exports to Italy, in common with most other countries, are eligible for the guarantee of the Exports Credits Guarantee Department, but that is not affected in any way by the Order which we are discussing, and there is no question of granting to Italy special credit facilities through the Export Credits Guarantee Department. These exports credits, as the House knows, are guaranteed for the benefit of United Kingdom exporters, and the decision whether a credit should be guaranteed is made on each individual application by a body of experts, solely on commercial and financial grounds.
The agreement is certainly somewhat complicated, but I hope I have said enough to assure the House of its general purport. I may sum it up by saying that its conclusion has been made possible by the fact that the commercial arrears have been successfully transferred under the old agreement, and the 27 per cent. of sterling hitherto allocated to them is

now liberated and can be turned to the needs of current trade. The net result, as I trust I have succeeded in making clear to the House, is that it will be possible to finance very substantially increased exports of coal and establish increased quotas for other goods. I hope, in those circumstances, that the House will approve the Motion.

11.16 a.m.

Mr. Pethick-Lawrence: I need hardly say that my right hon. and hon. Friends and myself examine any proposal to this House arising from negotiations between His Majesty's Government and the Italian Government, with a good deal of suspicion. I do not think that that anxiety is confined to Members on these Benches. I believe that in all parts of the House any step which worked out, directly or indirectly, at providing financial credit from this country to help Signor Mussolini in subduing the Abyssinians or in assisting General Franco in overturning the Government in Spain or in building, or continuing the fortification of, points in Spain or elsewhere, which are likely to be inimical to this country, would receive very grave scrutiny and, I think, in general, disapprobation. However, the right hon. Gentleman will perhaps not be surprised when I say that, having looked yen, carefully at the proposals which we are now discussing, I do not find that they come under the category which I have already said would give us grave grounds for anxiety. It seems to me to be more or less an incidental rearrangement, required for the normal process of trade, and, therefore, I do not think that those who are sitting with me on these Benches have any ground for taking exception to them.
I would only say that I should be glad if the right hon. Gentleman would indicate to us what, in his opinion, is likely to be the future course of this clearing agreement, assuming normal conditions, because the object of clearing agreements is to clear, and therefore, presumably all these clearing arrangements are expected to come to an end at the earliest possible opportunity. I should be glad if the right hon. Gentleman the Financial Secretary would tell us before the Debate ends whether, if things proceed normally along the lines that the right hon. Gentleman has


suggested, it is expected that the necessity for a clearing arrangement will come to an end, not of course in a few weeks, but a few months; or whether he anticipates the prolongation of it for a year or several years, before it is finally closed down.
It is very satisfactory that the old debts, as I understand, are either entirely or nearly wiped out, but I am not sure whether, in the course of these proceedings, new debts get into arrears, or the working of the arrangement is that all the new, I will not say debts, but arrangements, are met, and the old debts steadily cleared off. If that is the case, I imagine the right hon. Gentleman will be able to tell us, more or less explicitly, how long this is likely to go on. If it is what I might call a revolving credit, paying off old debts by creating new ones, I can understand that he will not be able to give us a specific forecast. In any case, whatever the position may be, I hope that before the amending Order is finally disposed of, it will be possible to have some indication as to how long it will be necessary to have a clearing arrangement—either this or another one.

11.21 a.m.

Mr. Graham White: I need not say that I do not rise to oppose this Order. In the event of those latent political considerations referred to by the right hon. Gentleman above the Gangway, one might have to take a very different attitude towards an arrangement of this kind; but it is certainly satisfactory to know that the need for this amending Order arises from the satisfactory developments of the original arrangements. I gather that if the previous arrangement had not been working well, we should not have been called upon to consider this Amendment. One hopes that, in the normal world, these arrangements will disappear; but I must confess that I think schemes of this kind are likely to be necessary for some time to come. The right hon. Gentleman asked for information as to how long these clearing arrangements will continue, and whether the process of clearing is likely to go on for ever. After a slight examination of Italian economy, I am afraid they are likely to continue for some considerable time, because a country which is devoting so much of its economy, not merely its surplus resources, to the purposes for

which Italy is devoting it, is hardly likely to be able to enter freely into transactions with the rest of the world, and, under present conditions, its urgent necessity is to curtail imports and try to stimulate its exports of finished material, which is where its economy is failing to operate. As long as that tendency continues, Italy will need to seek protection of this kind, so that its citizens may continue their trade. I am afraid it will be some time before these agreements cease to be necessary.
The right hon. Gentleman in introducing this Order said it was fairly complicated. It certainly is. If I ask one or two questions it is because I have failed to steer my way through the various sub-heads, and I am not clear about some of the details in the arrangements. The working of an agreement of this kind depends for its success, to some extent, upon the spirit in which sections of it are carried out. There have been difficulties in working the old agreement with regard to the allocation of freight and insurance charges. I do not know whether that has been so in regard to coal, but I notice that, in Article 2, paragraph (a), it is specifically mentioned that it is the f.o.b. price of United Kingdom coal imported into Italy which will be dealt with by the deposit of Italy into the clearing account. On the other hand, it is not specified in paragraphs (b) and (c). It is in regard to general goods that there has been some uncertainty arising in this way. It has not been the f.o.b. costs which have affected the credit, but the costs at the port, freights, freight insurance and many other charges, which have tended to upset or disturb the quota of the particular kind of goods that it is sought to export to Italy.
Difficulties have arisen of that kind, and I should be glad to know whether the difficulty, or what appears to be the differentiation, in the matter of coal and other commodities will arise in future? I have heard of complaints, even under the agreement, of undue delay in the remittance arising between the time of the arrangement made with the Bank or Italy and the time it is received in this country. There have been some complaints, too, of the rate of exchange. I was utterly unable to understand whether there is any fixed rate of exchange at which these transactions are to be made.


Is it the rate of exchange of the day, or is it that different transactions, even on the same day, may be carried out at different rates of exchange? Is there some method of differentiation between the different classes of credit? These are points upon which I should be glad to have some further information.

11.27 a.m.

Mr. Petherick: I can quite understand that the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence), who spoke from the Labour front bench, and the hon. Member for East Birkenhead (Mr. White), who spoke from the Liberal bench, have anxiously searched through this amended agreement looking for bogeys, but they have recognised its transparent innocence. I am not quite as confident of its innocence as hon. Members opposite. I have a suspicion that sometimes these agreements are made peculiarly complicated in order that nobody in the House of Commons shall understand them and consequently that they shall go through with very little opposition, if any. This agreement, as leas been said, is very complicated, but I believe that that is because the agreement which the present agreement amends is as complicated, and even more so. My right hon. and gallant Friend, in moving that approval be given to the Motion, made a rather encouraging statement of the course of Italian trade, and the general operation of the immediately preceding agreement which this one purports to amend. I should like to ask him one or two questions.
Hon. Members may recollect that the agreement which this one amends was not the first agreement. There was one made in 1935. At that time the arbitrary date of 19th March was fixed, and all debts due to British subjects at that date came into the agreement, and, in due course, were paid, or should have been paid. But for some obscure reason which I have not been able to understand debts due to British subjects before that date did not come into the agreement at all. That was, obviously, unfair and some of us protested in this House, and in the subsequent agreement the matter was put right. Some of those old debts prior to the date I have mentioned which were subsequently taken over in the second agreement, are still outstanding. I have kept in rather close touch with some of

my constituents and others who were suffering and had money locked up in Italy in Italian lire for some years. They had the mortification of seeing creditors of Italy, who ranked chronologically some time after they did, paid in full, whereas they were still waiting for their cash. Can my right hon. and gallant Friend tell me the oldest debt still outstanding which is due to British creditors covered by these agreements? Can he give an indication of the amount still outstanding of debts due prior to, 19th March, 1935, to British creditors? Can he also give any indication of the amounts clue to British creditors still outstanding for any years he cares to choose between 1933 and 1937? I should be very grateful if we could have the information, as it would give some indication of the success or otherwise of these agreements in enabling old debts of Italy to be paid off.

11.31 a.m.

Mr. Kirkwood: Like many of my colleagues, I view anything arising in the nature of finance for Italy with grave suspicion. It is particularly so regarded by the working classes in Britain at the moment. We are at present negotiating with the Government with regard to the engineering question, and this question is one in which we are very much interested. Is there anything in connection with this agreement which presents even the shadow of a case that Britain is going to give any financial aid at the moment to Italy? If there is to be anything on that line, the Government are looking for very serious trouble. It appears to me that they are out to destroy themselves. If the gods wish to destroy, they first make mad. It is evident to me that they are playing absolutely into the hands of the Opposition. Not only the average member of the working class but the whole of the people of Britain are up against the idea at the moment of giving Italy any financial aid. I hope that this is not some subtle scientific method to try to confuse the House in order that the Government may be able to give Mussolini financial assistance.

11.34 a.m.

Mr. Benson: I was rather amused to hear the speech of the Parliamentary Secretary to the Board of Trade in that he seemed to take credit to himself for the working of this scheme during the past 12 months. It certainly has worked


more satisfactorily than I thought it would, but I cannot give any credit to the Government for that. Their economic policy has been diametrically opposed to the policy of making this clearing agreement work. The clearing agreement only works if Italian exports come into this country in sufficient quantities. The ink on the agreement had scarcely dried before they introduced another Order to put tariffs on Italian tombstones to keep that trade out.

Mr. Petherick: Hear, hear.

Mr. Benson: The hon. Member says, "Hear, hear." He may agree with that policy, but it is no use agreeing with that policy, and then congratulating yourself that the clearing agreement has worked, because the agreement can only work by the admission of Italian imports. If you keep Italian imports out, your clearing arrangement is completely ruined.
Why has the Agreement worked? It has worked in spite of the muddled policy of the Government. I do not think that the cause of its working is anything on which we can congratulate ourselves. It has worked because there has been a terrific drop in British exports, and for no other reason. Prior to sanctions, we had a favourable balance of trade with Italy, even excluding invisible imports. During the last 12 months we have had an adverse balance of trade with Italy. Italy has sent us £1,000,000 worth of goods more than we have sent to Italy, and the result has been a surplus of sterling balances in the sterling accounts to meet arrears. I am not grumbling about that, for I am not hypnotised by the balance of trade argument. Hon. Members opposite, who construct the whole of their tariff policy in order to get a favourable balance with various countries should be the last people in the world to congratulate themselves when there is an adverse balance of trade.
The arrears in the various accounts under the Agreement of 6th November have been reduced for two reasons. First, there has been £1,000,000 of favourable balance to Italy and, secondly, they have taken another £1, 000,000 out of current trade and put that to the repayment of arrears. Under the 6th November Agreement 30 per cent. of the sterling balances were to be applied to arrears. That is approximately about £2,000,000. It is

for that reason, partly the adverse balance of trade and partly the fact that they have been robbing Peter to pay Paul, that they have succeeded in reducing the arrears that existed when the 6th November Agreement was entered into.
I have completely failed to understand the explanation of the right hon. and gallant Gentleman with regard to the 46 per cent. coal allocation. He seemed to suggest that that was a method by which to expand our coal exports. It is nothing of the kind. If we analyse that allocation carefully we find that if there is no proportionate increase in coal exports, if trade figures are stabilised on the basis of 1937, it will undoubtedly put the coal exporters in a favourable position. During the 12 months they get payment for their exports amounting to l00 per cent. They contribute nothing to the repayment of arrears, even coal arrears. The burden of paying off arrears is thrown entirely on the non-coal exporters. Whether that is equitable or not it is not for me to say, but that is the effect of the arrangement. But that only applies if there is a stabilisation of exports at their present level.
If there is an increase in the amount of coal exported or, conversely, if there is a decrease in the amount of other articles exported, then the coal exporters will be in a worse position, because their amount is limited to 46 per cent. The fixing of these trade quotas for the coal exporters is a gamble. It may help them and may put them in an undoubtedly favourable position, or it may put them in an unfavourable position. It entirely depends upon the course of trade during the coming year and upon the proportions of that trade, whether it is coal or non-coal. I do not see any advantage whatever in the allocation of current debts into two parts. Pooling is a much more flexible arrangement. I see no reason why the non-coal exporters should be asked to bear the whole of the burden of the repayment of arrears.
We need a great deal more data—more facts and figures than have been supplied. All that we have had is a cursory explanation of the agreement. We have the agreement before us and can read it, but we have not the facts and figures behind it. We have not the facts and figures behind the 6th Novem-


ber Agreement. The Government have been extremely chary of figures. The Financial Secretary introduced the 6th November Agreement, and gave us two figures only. We were told that in June, 1936, there were debts of £1,750,000 owing by Italy and that during the sanctions period the Government by its Clearing Office had collected £600,000, leaving approximately £1,150,000 owing. Had the Order not been introduced at midnight we should have pressed him a great deal more for adequate figures.
Now that we have a whole day in front of us, I hope the Parliamentary Secretary to the Board of Trade will give us not a mere verbal explanation of the agreement but some data as to how the 1936 agreement has worked, the amount in the various arrears accounts, how much has been paid off, what is the present position in regard to current trade, how many arrears have accumulated during the past 12 months on current trade, and data of that kind. I see that the Lira Sterling Arrears Account, "C" has had increased allocations from 3 per cent. to 6½ per cent. That suggests that the arrears have been accumulating in that account. Therefore, we ought to have more information, dealing with invisible imports, with non-trade debts, rents, interests, insurances and matters of that kind. Those are things that we cannot get from the ordinary tables of trade. We are entitled to know the amount that is owing by Italy, the amount of arrears, and how much has been paid off during the past 12 months. The allocations of three per cent. on the trade figures of 1937 amounted to £200,000 or £300,000. It is now proposed to allocate something like £400,000 for the present year. That is for arrears, not for current trade. The 6½ per cent. goes to the Sterling Arrears Account, "C".
I should like to know what arrangements are being made for the payment of current invisible imports. What financial arrangements are being made in respect of interests, rents, insurance—I do not mean trade insurance, but life and fire insurance? Not a word has been said except that the Italian Government are proposing to put an unspecified amount of sterling at the disposal of the Clearing House for that purpose. We are entitled to know what the invisible imports of this type are, and what is the unspecified

amount of sterling which the Italian Government proposes to place at the disposal of the Clearing House. Unless we get facts of this kind we cannot possibly judge the effect of the last agreement or for that matter the effect of the present amendment to it. The Government have been very chary of giving facts and figures, and we are entitled to have the fullest information about this arrangement.

11.46 a.m.

Mr. David Adams: The Parliamentary Secretary to the Board of Trade in his explanatory statement almost led the House to believe that this was some new method of curtailing or restricting in some way our trade with Italy. An arrangement for a renewal of the agreement with Italy means a continuance of the previous arrangements under which we trade with Italy, as with Germany and Japan, on precisely the same terms as we did before hostilities broke out, and to give the appearance that we are not aiding in the re-armament of Italy by this arrangement is sheer deception. The continuance of the use of export credits guarantee is the most favourable device that could be invented for the benefit of the country to which our exports go, and we are using the credit of the British Government, not as has been suggested by the Parliamentary Secretary to the Board of Trade for the benefit of our exporters, but really and in effect for the benefit of the country to which our exports go. We are under this agreement conferring an unlimited right upon Italy to buy our coal and any other goods, and Italy may use this for the manufacture of munitions or for any other purpose she may please. If there are losses to be borne, these are borne by the British Treasury, as I understand the agreement, and by no other party. I am anxious to know the period for which these guarantees are granted.

The Financial Secretary to the Treasury (Lieut.-Colonel Colville): I am not clear to what guarantees the hon. Member is referring. There is no suggestion of guarantees for credits in this Order.

Mr. Adams: I take it we are utilising the export credits guarantee.

Lieut.-Colonel Colville: That is not included in this Order.

Mr. Adams: If it has nothing to do with this Order I have completely misread it. It is, in fact, a guarantee of British credit to British traders for the purpose of exporting British coal and other goods to Italy, and, that being the case, this system has been devised in order that there should be a continuity of our trade to a country to whose credit bankers in London would not look apart from the guarantees which are given by the British Government. That is the position, and we must not deceive ourselves into thinking that we are taking some step to impair the competence of the Italian Government to produce munitions to be used against any part of the world she may think fit.

11.51 a.m.

Lieut.-Colonel Colville: I will try to reply to the various points which have been raised in the Debate, and in the first place I should like to re-iterate what has been said by the Parliamentary Secretary in case there is still any misapprehension in the minds of hon. Members as to this Order. There does appear to be some misapprehension from the speech of the hon. Member for Consett (Mr. David Adams). This Order has nothing to do with the Export Credits Guarantee Department, which functions quite separately, and there is no suggestion of any kind of guarantee under the operations of that department in this Order.

Mr. David Adams: Surely it has the same effect.

Lieut.-Colonel Colville: There is no question of guaranteeing credits. It will be necessary, I think, to go over past history in order to clear up the point, since I do not want there to be any misunderstanding about it at all. Between April and November, 1935, a payments agreement was in force with Italy which provided that sterling, paid in settlement of trade debts due from the United Kingdom to Italy, should be used to meet the trade debts due from Italy to this country in respect of current United Kingdom exports and re-exports. There was no compulsion on debtors in the United Kingdom to make their payments into the sterling account opened in the Bank of England for the purposes of the agreement, and, therefore, it did not work satisfactorily. Considerable arrears accumulated in Italy, including very substantial sums in respect of debts which

were not transferable through the accounts opened under the agreement.
There was in existence an Act of Parliament which enabled the Government of this country to put on compulsory clearings if they thought it necessary, but in answer to the question raised in the Debate let me say that it is not the policy of His Majesty's Government to apply clearings except where they are forced to do so in order to get satisfaction for United Kingdom creditors. We do not apply clearance for the purpose of forcing and encouraging trade. Some countries believe that they can develop their export trade by putting on clearings, but we do not believe that, and I say clearly that the policy of His Majesty's Government is to come out of these clearing agreements as soon as they can. They put them on only when it is necessary to safeguard their trade and financial interests. Although there was in existence an Act of Parliament which enabled us to apply compulsory clearings we did not in the first instance apply it in the case of Italy, where we tried to work first by voluntary arrangements. In November, 1935, on the imposition of sanctions, a controller of Anglo-Italian debts was appointed to whom debts due for Italian goods were made payable compulsorily. By July, 1936, some £600,000—I will give as many figures as I can—had been collected in this way, and that was applied to reduce the arrears of payments due to the United Kingdom.
In July, 1936, on the abolition of sanctions against Italy, it was decided to set up an Anglo-Italian Clearing Office, payment to which would be compulsory. We have tried the voluntary method because we did not like compulsory clearings, but it did not work satisfactorily and we were inundated with complaints about the operation of the Anglo-Italian Trade Agreement. We were compelled to apply compulsory measures, and this was effected by the Clearing Office (Italy) Order of 1936. Meanwhile sterling received by the newly established clearing office was placed to a reserve fund pending the outcome of negotiations which were set on foot at that time. Some negotiations did take place with the Italian Government before it came into operation, but it was put into effect by the Clearing Office (Italy) Amendment Order of 1936. That agreement provided


for the payment to the Clearing Office in sterling of debts from persons in the United Kingdom to persons ordinarily resident outside the United Kingdom in respect of Italian imports into the United Kingdom, and for the distribution of the sterling thus received by the Clearing Office in the following proportions: 70 per cent. for current trade debts, 27 per cent. for commercial arrears, and 3 per cent. for financial debts and remittances, the recurrent items such as rents and interest to be transferred in priority to capital items. Provision was made for the distribution of sterling in the reserve fund in the proportion of 50 per cent. for arrears and 50 per cent. for current trade. Any balance not required for current trade was to be applied periodically to the reduction of commercial arrears. I will now answer some of the questions of the hon. Member for Chesterfield (Mr. Benson) by giving the figures as to the results of that agreement. Under the agreement of 1936, the following amounts were distributed: for current trade, £5,304,000; for commercial arrears, £2,672,000—

Mr. Benson: During what period?

Lieut.-Colonel Colville: Down to the time when the new clearing agreement was made. For financial debts, an amount of £415,000 was distributed. With regard to arrears on trade debts, it would be too sweeping a statement to say that they have been cleared off altogether, but to all intents and purposes they have been settled.

Mr. Petherick: To what date?

Lieut.-Colonel Colville: There is a normal lag in payments which one may put at from six to eight weeks. I am speaking subject to correction, but I think I am right in saying that except for this lag of from six to eight weeks there are now no arrears in our trade debts. The new clearing Agreement which has been explained by my right hon. and gallant Friend the Parliamentary Secretary to the Board of Trade is a readjustment, as the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) correctly said, in view of the fact that the old situation. in which there was a big accumulation of arrears, has been dealt with. It is a readjustment to provide a larger share for current trade. The hon. Member for Chesterfield

said that he had doubts as to the wisdom of earmarking a proportion for coal and for non-coal exports. I do not think the hon. Member's gloomy prophecies will be fulfilled. I believe it will be a satisfactory agreement from the point of view of coal; and the non-coal exports, which in several instances have received increased quotas, are articles in which this country is very much interested. Of course, the proof of the pudding is in the eating, but as coal is a very large and important interest between this country and Italy, it was thought wise to divide the allocation in this way. The hon. Member said the agreement was a gamble, but I do not think so. I believe that it will work for the benefit of our coal industry in South Wales. The hon. Member for East Birkenhead (Mr. White) asked why it was provided in the agreement that coal should be f.o.b., whereas non-coal exports are c.i.f. The reason is that in the case of coal, the Italian Government agreed to pay freight and insurance from the free exchange available to them, and thus it is that the term f.o.b. is used in respect of coal, but not in respect of other commodities.

Mr. White: Does the right hon. and gallant Gentleman appreciate that the c.i.f. terms may disturb the quota?

Lieut.-Colonel Colville: I think allowance has been made for that. One important point which has arisen in the discussion has been the view which has been expressed by some hon. Members that these clearing agreements should have a date of termination in sight. Obviously, we cannot say when such an agreement will terminate because it takes two to make an agreement, but His Majesty's Government wish to see these operations terminated as soon as possible, and will not employ them for a moment longer than is necessary. We feel, however, that the modifications which are proposed in the present agreement which result from the wiping off substantially of an accumulation of debts, and provide for the allocation of a larger proportion to our current trade, will be helpful to our trade within the operations of the clearing machinery.

Mr. Kirkwood: I wish to put to the right hon. and gallant Gentleman a point which is of importance to me at the


present time. I wish to be clear that there is no reason for supposing that by this agreement Britain is in any way going to finance Mussolini. The reason I am so anxious about that is that at the moment my Union is meeting in York concerning the very important question of the dilution of labour. The Government are asking the Union to let go trade rights which we ought not to let go, but to defend. They are asking us to let them go because of Mussolini. Does the right hon. and gallant Gentleman think that if I tell the Union that the Government are busy at the moment in making arrangements to finance Italy, our fellows will let go of any of their trade rights? Certainly they will not. I must have that guarantee now, either one way or the other.

Lieut.-Colonel Colville: I will answer the hon. Member categorically. There is no suggestion of any loan or credit or financial assistance in this Order. It is a clearing Order under the existing Clearings Act, which means that the money realised from Italian goods sold in this country will substantially be used for the purpose of British goods going into Italy. That, roughly, is what is involved. The hon. Member may be quite clear that there is no question of any credit or financial assistance.

Mr. Kirkwood: Thanks very much.

Mr. Petherick: I appreciate that my right hon. and gallant Friend has not all the figures for which I asked, but will he give me this assurance? If I understood him correctly, he said that the arrears of trade debts were only about six weeks.

Lieut.-Colonel Colville: Or eight weeks.

Mr. Petherick: Does that include trade debts back over a period of time even prior to the 1935 agreement?

Lieut.-Colonel Colville: On these points of detail, I speak subject to correction, and if I find it necessary to do so, I will send a correction to my hon. Friend in writing. I was speaking of the whole range of debts.

Mr. Benson: The right hon. and gallant Gentleman referred to the elimination of trade debts, but he did not mention the

question which I asked about non-trade debts. There has been an increased allocation from 3 to 6½ per cent. to sterling arrears account "C." I assume that that is due to the fact that we have larger balances. Or is it due to the fact that there has been very little reduction of the non-trade debts? I should like, further, to know whether the non-trade debts are current non-trade debts dealt with outside the scope of these agreements, and if so, how?

Lieut.-Colonel Colville: There is a slightly larger amount available and that has been allocated in the way the hon. Member has indicated. Perhaps I ought to dispel one impression which the House may have gathered from my remarks. I am speaking of arrears in payment of current trade when I say six or eight weeks. That is the normal lag which takes place in payment. In our trade with Italy we had got far beyond the normal period of lag, and the payments were very greatly overdue. Beyond what may be called the normal lag in certain trades, that is not now taking place, arrears have been substantially cleared off. I am not saying that there are not some individual cases in which debts have not been met, but if they are brought to my notice, I shall be glad to look into them. In fact I am told that the payments made by Italian debtors to the Italian Institute and awaiting transfer through the Trade Arrears Accounts amount to rather less than the equivalent of £10,000, which is not an enormous sum.

Question put, and agreed to.

Resolved,
That the Clearing Office (Italy) Amendment Order, 1938, dated the twenty-eighth day of March, nineteen hundred and thirty-eight, made by the Treasury under the Debts Clearing Offices and Import Restrictions Act, 1934, a copy of which was presented to this House on the thirtieth day of March, nineteen hundred and thirty-eight, be approved.

CLEARING OFFICE (RUMANIA) AMENDMENT ORDER, 1938.

12.6 p.m.

Captain Wallace: I beg to move,
That the Clearing Office (Rumania) Amendment Order, 1938, dated the twenty-eighth day of March, nineteen hundred and thirty-eight, made by the Treasury under the Debts Clearing Offices and Import Restrictions Act, 1934, a copy of which was presented to this House on the thirtieth day of March, nineteen hundred and thirty-eight, be approved.


This Order is made under the same Act as the preceding one, and the same procedure is necessary. As there seems to be an idea in some quarters that I gave a rather inadequate and perfunctory explanation of the previous Order, perhaps I had better go back on this occasion a little further into Rumanian history. The original need for setting up a clearing arrangement arose from the restrictions imposed by the Rumanian Government on the transfer of funds out of Rumania which resulted, as long ago as 1934, in the accumulation of a large volume of blocked trade and finance debts owing to United Kingdom creditors. We attempted, as in the case of Italy, to liquidate these debts without setting up a compulsory clearing system, for, as my right hon. and gallant Friend has said, we regard clearings as a necessary evil but definitely as an evil. That attempt proved unsuccessful and we were obliged to set up a compulsory clearing in June, 1936.
The clearing worked very well during the following year owing to the high level of Rumanian imports into this country. A great part of the outstanding trade debts have been liquidated, the arrears of payment due on Rumanian loans at the reduced level provided for under the agreement between the Rumanian Government and bondholders were overtaken, and good progress was made with the transfer of payments in respect of the remaining financial debts due to creditors in the United Kingdom.
In May last year an amending agreement was concluded which changed the proportions between the amounts of sterling allocated to the different classes of debts, and owing to the large amount of sterling available it was possible, without prejudice to other creditors, to provide for a substantial increase of the amount of United Kingdom export trade and to increase the amount of free sterling placed at the disposal of the National Bank of Rumania. The existing arrangements are, therefore, based on the two agreements of 1936 and 1937 which were supplemented by two technical agreements signed at the same time, which govern the machinery of the clearing and into which the House will probably not wish me to enter.
The clearing continued to work well until towards the end of last year. Since

then, there has been a considerable decline in the amount of Rumanian exports to this country and this, of course, has meant that less sterling has been put into the clearing with the result that there has been some danger of an accumulation of fresh arrears of payments—the very thing that the clearing is designed to avoid. In those circumstances the National Bank of Rumania, who were very anxious to maintain the commercial relations of our two countries on a sound basis, offered to make certain transfers of sterling from its free exchange resources outside the clearing to certain sub-accounts of the clearing which, under existing arrangements and owing to the decline in Rumanian exports, are at present receiving insufficient sterling to meet the calls due to be made upon them. The National Bank of Rumania offered to do this on the understanding that the sub-accounts would repay the amounts concerned when and to the extent that the clearing office and the National Bank should agree that an available surplus existed on those sub-accounts—in other words, when better times came.
This offer was very readily accepted by His Majesty's Government, but, unfortunately, it was not possible to implement it under the Orders then in existence because while the Orders did not prevent the Clearing Office getting an advance of money from the Rumanian National Bank outside the clearing, they did not empower the Clearing Office to repay anything. Therefore, it was necessary to sign a supplementary agreement embodying the proposal; this agreement was signed at Bucharest on the 25th February and appears in the Schedule to the Order. The National Bank of Rumania has already transferred £404,803 to the clearing under this arrangement up to this morning. The House will see that this Order is required to enable something to be done which is to the advantage of the trade of both countries. It is the only means by which the clearing can repay to the National Bank of Rumania the sums which they are advancing from their free resources of sterling at the present time and I hope therefore that the House will approve of the Order.

Mr. Pethick-Lawrence: I do not think that any exception can be taken to this Order. I believe it to be not only a


workable but a satisfactory proposal and I have only one question to put to the right hon. and gallant Gentleman. He told us that the necessity for the offer by the Bank of Rumania arose from the fact that there had been a considerable falling-off in exports from Rumania to this country. It would be of interest to the House to know, first, in what commodity has the principal falling off taken place, and, secondly, why has the falling off taken place? I do not know whether it is due to any arrangement between Rumania and the German Government for closer co-operation in trade, but whatever the reasons may be, it would be of value to the House if the right hon. and gallant Gentleman were able to supply us with a statement of them in broad outline.

Captain Wallace: I am glad that the right hon. Gentleman has raised the point. In 1936, when this arrangement started, Rumania was fortunate in having a very good harvest, while harvests over most of the rest of the world were good. Prices of grain rose and Rumania was able to export exceptionally large quantities of wheat and barley to this country. Moreover the arrangements made in the Payments Agreement in favour of the oil companies encouraged the oil companies to send oil to this country. As a result, our imports from Rumania in 1936 were valued at £6,200,000, as compared with £3,200,000 in 1935. Unfortunately the Rumanian harvest of 1937 was a failure, except as regards wheat; but even the wheat did not come to the United Kingdom, because United Kingdom prices were not attractive and Germany was prepared to take the Rumanian supply. Oil production in Rumania also declined during 1937, and this decline was reflected in her export trade to the United Kingdom. The result was that our imports from Rumania fell from the large total of £6,200,000 in 1936 to £4,500,000 in 1937, and the decline, which was particularly marked in the autumn, has, I regret to say, continued during 1938. Of course it is obvious that it is to the advantage of this country that our trade with Rumania should go

on, and the possibility of stimulating Rumanian exports to the United Kingdom is being actively considered, both in Rumania and in this country.

Mr. Benson: What is the amount of our exports to Rumania? What is the balance of trade?

Captain Wallace: Our total exports to Rumania in 1936 were valued at £1,120,365 and our re-exports at £45,224. In the same year our imports from Rumania were valued at over £6,000,000. The hon. Member will appreciate that those figures cannot be taken as conclusive, for there are such things as triangular and quadrilateral trade in the world. We are most anxious by every means in our power to increase our trade with Rumania and this arrangement which the National Bank has made to help the clearing should be advantageous.

12.17 p.m.

Sir Arnold Wilson: Taking my cue from the remarks made on the subject of the previous Order by the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence), I hope that nothing that is said in approving this Order will make Rumanians believe that we in any way approve of the way in which they are treating the Jews in Rumania at this moment. There has been a fresh recrudescence of the worst form of persecution in Rumania, contrary to the Berlin Treaty of 1878, of which we are signatories. While I share the desire that our trade should increase, I hope that the Rumanian Government will not think that in approving this Order we in any way give our consent or shut our eyes to what has been going on in Rumania and I fear is still going on in the matter of their treatment of minorities, particularly the Jews.

Question put, and agreed to.

Resolved,
That the Clearing Office (Rumania) Amendment Order, 1938, dated the twenty-eighth day of March, nineteen hundred and thirty-eight, made by the Treasury under the Debts Clearing Offices and Import Restrictions Act, 1934, a copy of which was presented to this House on the thirtieth day of March, nineteen hundred and thirty-eight, be approved.

Orders of the Day — TRADE MARKS BILL [Lords].

Order for Second Reading read.

12.19 p.m.

Captain Wallace: I beg to move, "That the Bill be now read a Second time."
This is a Bill to consolidate the Trade Marks Acts. Hon. Members will recall that we passed last Session an Act which made very considerable additions to and amendments of our trade marks law. When that Bill was before this House I intimated that my right hon. Friend hoped to introduce a consolidating Measure as soon as possible, and this is the Bill for that purpose. The Bill consolidates the Act of last Session with the earlier Trade Marks Acts of 1905 and 1919. With the exception of certain provisions relating to international conventions, which are more conveniently dealt with in the Patents and Designs Act, and certain provisions to do with criminal proceedings, which are more appropriate to the Merchandise Marks Act, The whole of the Statute law relating to trade marks is contained in those three Acts. This Consolidation Bill simplifies and rearranges this branch of the law and makes it more easily understood.
The Bill having received the necessary certificate from the Committee, it is not for me to go into any detail. The only point on which I think I should say a few words is the question of when it shall come into operation and how the Act which we passed last Session will be affected. It is provided in Clause 71, Sub-section (2) of the Bill, that the resulting Act shall come into operation on the date to be fixed under the Trade Marks Act passed last Session for the coming into operation of that Act, and immediately after that Act comes into force. As this Bill repeals the Act of last Session, the result will be that the provisions of that Act will come into operation in the form in which they are now embodied in this consolidating Bill. It may sound unusual to pass an Act last Session and now repeal it before it has actually come into operation, but it was explained to the House at the time that the object of this procedure is to make it possible for the new Rules, which would otherwise have to be made in connection with the

Act of last Session, to have reference to and to be based upon the consolidating Measure only. The desirability of that I indicated on the Second Reading of the previous Bill.
The main consideration, therefore, is the time that will be taken to make the new Rules under the Consolidating Act. Under Sub-section (3) of Clause 40 of the Bill notice of intention to make the Rules has to be published, and copies of the Draft Rules have then to be available. Rules have actually been drafted and the printed draft is at present being revised, so that it should be possible to publish notice of intention to make Rules quite soon after this Bill becomes law. I think it is generally accepted in all quarters that the sooner the Rules are made the better. Therefore, supposing that the Bill is enacted by the end of April, I am advised that we ought to be able to publish notice of intention to make the Rules very early in May, and to give, say, a month for possible objections. If there are no objections the Rules can be made in June and be brought into force on 1st July. That is the date at which His Majesty's Government aim. But if there are objections to the Rules, and in so far as the objections are serious, it will take longer. I think I indicated last Session that we hope to bring the whole of this procedure, with the consolidating Bill, into operation by 1st July, and at the present moment I see no reason why we should not redeem that promise.

Question, "That the Bill be now read a Second time," put, and agreed to.

Bill read a Second time.

Bill committed to a Committee of the whole House, for Monday next.—[Major Herbert.]

Orders of the Day — PATENTS, ETC. (INTERNATIONAL CONVENTIONS) BILL [Lords].

Order for Second Reading read.

12.25 p.m.

Captain Wallace: I beg to move, "That the Bill be now read a Second time."
The purpose of this Bill is to make a number of amendments in our patents, designs, trade marks, and merchandise marks law, in order to enable His Majesty's Government in this country to give effect to two international Conventions in the forms to which those Con-


ventions were revised at the London Conference of the International Union for the Protection of Industrial Property in the year 1934, and to deal with certain matters affected by those Conventions.
The Convention Amendments to which effect is proposed to be given by this Bill were, with one exception, made in the International Convention for the Protection of Industrial Property. The one exception is concerned with merchandise marks and was made in the other Convention, the International Agreement for the Prevention of False Indications of Origin on Goods. The Industrial Property Convention is the general Convention of the Union, which at the present moment comprises 40 countries, and the Agreement regarding false indications of origin is made between 21 of those countries. Both Conventions in their revised form are due for ratification by 1st July this year. The main Convention has in fact already been ratified by three countries, namely, the United States, Germany, and Denmark, and the Agreement regarding false indications of origin by Germany, and the present Bill is intended to prepare the way for ratification on behalf of this country.
The main provision of the Convention is that persons within the jurisdiction of any member country in the Union, are, as regards the protection of their industrial property, to enjoy in all the other countries of the Union the advantages which the laws of those countries grant to their own nationals. It is a reciprocity Convention, but it requires in addition that certain matters shall be provided for in the laws of each particular country if they are not already there. Among these is a provision, which has long been in force here, that where an application for a patent or for the registration of a design or trade mark has been made in any one of the Convention countries, a subsequent application for the same subject matter made in any other of the Convention countries within certain specified periods is to be treated for the purposes of priority—and priority is extremely important in these matters—as if it had been made in that other country on the same date as the application in the first case. This provision is of particular advantage in the case of patents, because it gives an inventor an opportunity without loss of priority of

testing his invention and of securing examination by the Patents Office in his own country before he decides whether it is worth while to seek protection for it in foreign countries.
The Bill, as the House will see, deals with a number of matters which have no direct connection with one another except that they are all concerned with industrial property and that they all relate to the Conventions which I have mentioned, and I propose, with the permission of the House, just to say one or two words on each of the Clauses of the Bill. But before I do so, I ought to inform the House that the hon. and learned Gentleman the Member for East Bristol (Sir S. Cripps), who is recognised throughout the country as one of the greatest living authorities on this branch of the law, was kind enough to give me notice yesterday that he intended to raise certain points on the Second Reading of this Bill. When I received his letter and saw what those points were, I was more than ever convinced of the advantages which must accrue to the Parliamentary Secretary of the Board of Trade if he has the good fortune, like my predecessor, to belong to some branch of the legal profession, and I very soon realised that it was quite impossible for a mere soldier turned politician or tradesman to take on the hon. and learned Gentleman in these difficult and abstruse matters. I have, therefore, secured the assistance of the learned Solicitor-General, and I hope that, having outlined the Clauses very briefly in non-technical language, I shall be able to leave these two very learned hon. Members to thrash them out in a little more detail.
Clause 1 of the Bill is to give effect to a new Article which was inserted in the main Convention providing that an inventor shall have the right to be mentioned as such in the patent. Our laws already require that in most cases. Clause 2 deals with the term for which a patent runs. The term is at present 16 years from the date of the patent, provided, of course, that the necessary renewal fees are paid. In cases where a patent is granted in this country with Convention priority, it is our practice to date the patent as of the date of the first application in the foreign country, and so to include the period of priority in the 16 years for which the patent runs. In


foreign countries that period is generally excluded. One of the Amendments to the Convention is directed to this point, and it provides that a patent obtained with the benefit of priority shall enjoy in the various countries of the Union—a duration equal to that which it would have enjoyed if the patent had been obtained without the benefit of priority.
The third Clause of the Bill arises from the way in which one of the provisions of our law affects patents granted with Convention priority. According to our law, a complete specification filed in connection with an application for a patent must, if a valid patent is to be secured, disclose the best method of performance of the invention known to the applicant when he left his specification at the Patent Office; but in the case of an application made with a claim to Convention priority the invention must be the same as that applied for in the convention country on the prior date claimed. That is a Clause to which the hon. and learned Gentleman opposite draws particular attention, and I will say no more about it at the moment. Clause 4 relates to measures for preventing the abuse of monopoly rights under a patent, as, for example, by nonworking of the invention in the United Kingdom. As a check on this particular form of abuse our present law provides that at any time after the expiration of three years from the grant of a patent application may be made to the Comptroller of the Patent Office alleging abuse of monopoly rights, and asking, among other things, for the grant of a compulsory licence to work the patent or even for the revocation of the patent altogether. Before the Comptroller can revoke a patent for this reason he has to be satisfied that any abuse of monopoly rights which has been shown to him to exist cannot be met by the exercise of some powers falling short of complete revocation, as, for instance, the giving of a compulsory licence to somebody else to work it. An amendment to the Convention provides that no proceedings for the revocation of a patent for abuse of monopoly rights shall be instituted less than two years from the granting of the first compulsory licence, and Clause 4 amends our law correspondingly.
Under our existing law, where the same applicant has made two or more

applications for a patent in a Convention country and the whole of the subject matter of these applications is only a single invention, he may on certain conditions obtain a single patent covering the subject matter of both or of all the applications. Clause 5 extends this privilege of being able, so to speak, to consolidate the applications if they are made for the same thing to a case in which the original applications in the Convention country were made by different applicants but the rights in these applications have become vested in the same person. Clause 6 provides that in determining whether an invention for which priority is claimed in this country is the same as that for which an earlier application was made in the Convention country, regard has to be had not only to what was formally claimed in the documents officially filed in that Convention country, but to the invention as disclosed in the whole of the documents.
Clause 7 deals with the subject of appeals against refusal by the Comptroller of the Patent Office to accept an application or a specification. In most cases that is subject to appeal to the appeal tribunal, which for this purpose consists of a judge of the High Court, but no provision for such an appeal is given at present under Section 91 of the Act against any such refusal on the part of the Comptroller on the ground of noncompliance with any requirement of that Section. This Clause proposes to give such a right of appeal. Clause 8 repeals a proviso to Sub-section 4 of Section 91 which is considered to be redundant, as indeed a case actually decided in the courts has proved it to be so. Clause 9 deals with what I can best describe as a sort of convention within a convention and of which I might give an example. Certain nations, parties to the Arrangement for the International Registration of Designs, which has its headquarters at Berne, have agreed that applications lodged at Berne shall be treated as equivalent to applications made directly to the countries themselves. Clause 9, following a new provision in the Convention, provides that we should treat an application made at Berne as if it were made in a Convention country if the Convention country itself so regards the application. Clause 10 is a machinery clause which clarifies the position with


regard to the making of Orders in Council concerning these subjects.
Clause 11 gives effect to the one Amendment, which I mentioned earlier, in the International Agreement as distinct from the International Convention. That agreement before its latest revision referred only to goods bearing a false indication of origin. By the new requirements inserted in 1934 the agreement is extended to cover the use of all indications in the nature of publicity capable of deceiving the public as to the origin of the goods, and appearing not only on the goods themselves but also on signs, advertisements, invoices, wine lists, business letters or papers, or any other commercial communications. The House will agree that there are plenty of ways of misrepresenting goods, either in regard to what they are made of or in regard to where they come from, other than by the simple method of putting a false description on them and I think this provision will be very generally welcomed. Clauses 12 and 13 and the Schedule relate only to consequential and minor Amendments.
I apologise to the House for taking up a considerable time in dealing with a very technical subject. Hon. Members who have tried to follow what I have said, and especially those who have succeeded will appreciate why I am so glad that the Amendments which the hon. and learned Gentleman the Member for East Bristol would like to propose to this Bill will be dealt with by a member of the legal profession.

12.42 p.m.

Sir Stafford Cripps: We have no objection to the Bill as a whole. It is one that obviously should be passed in order to put into operation the agreements which have been arrived at in international Conventions. There are, however, one or two observations which would perhaps be appropriate at this stage in order that the Government may have an opportunity of considering them before a further stage is reached. Clause 1 is designed to carry out a clause in the International Convention that the inventor has a right to be mentioned as such in the patent. There has been a good deal of complaint in the past that the man who has really been responsible for the ingenuity of the

invention has not received the credit for it. This is not a question of financial credit, but a question of real credit scientifically for having made the invention. Patents often become associated with the names of the patentees that appear on them. It is obviously highly desirable that people who carry through the research and exercise the ingenuity should have their names associated with the results of their research, even though they may have no financial interest in the patent.
That is the object of this Clause. It proposes that the inventor or, as he is called, the actual deviser of the invention, should be entitled to be mentioned as the inventor in the patent. It is useless to mention him in the patent for that is the one document that nobody sees. The registered owner is the only person who sees it. The document which everybody sees is the specification of the patent, and that is where the name should be mentioned in order that the public may associate the patent with the inventor. Therefore, I suggest that this should be altered. It was clearly the intention of the Convention when it spoke of the patent that it meant the public document which everybody sees and which contains the information. I suggest that the extremely elaborate procedure laid down in the Clause for proof and opposition and all the rest of it is unnecessarily complicated, and is liable to lead to a great deal of dispute and discussion, which is an undesirable waste of everybody's time and money.
It would be much easier if on the ordinary application form for a patent which has to be signed by every applicant there were a space which he should be required to fill in giving the name of the person who is the actual deviser of the invention. The liability then rests upon him to fill it in correctly, and if he does not do so his patent may subsequently be revoked because of the false statement on the application form. He could at the same time, if he wished, file a statement from the actual deviser disclaiming the right to have his name on the application, and if that were done the actual deviser's name would not appear. Apart from such a disclaimer being filed the actual deviser's name always appears on the specification. It may appear at the top in the statement "Invention by


William Smith," or whatever the name is, or it may appear in whatever place it is thought right to put it in. That simple procedure requiring the information to be entered upon the application form will, it seems to me, do away with the whole of the complicated procedure which is laid down in Clause 1, and I ask the hon. and learned Gentleman to consider whether it would not be a better and more efficient way.
A point of some little difficulty, perhaps, arises on Clause 3. That Clause is designed to get over a difficulty which arises under paragraph (2, j) of Section 25 of the Act of 1907 which is the revocation Section. One of the reasons for revocation is that the complete specification does not disclose:
the best method of performance of the invention known to the applicant for the patent at the time when the specification was left at the Patent Office.
Under the law of disconformity it is necessary, in the case of a British specification, not to have between the provisional and the complete specification a difference in the invention disclosed, but it is permissible to have a legitimate expansion of the invention which has been disclosed in the provisional specification. That is to say, that if the provisional specification shows some crude mechanism it is possible to perfect it and to show the completed mechanism in the completed specification and to attach the claim to such completed mechanism. In the case, however, of Section 91, where an application is made in a country abroad, it has recently been held, contrary to an earlier decision, that there is no such permitted legitimate expansion, with the result that the complete specification in such a case as I have mentioned could not do anything more than claim protection for the crude mechanism. If it did there would be a possibility of disconformity arising, because ex hypothesi the complete specification in such a case could not disclose the best method known to the person when he filed it; he would not have been allowed to put it in, but could only put in the crude mechanism.
This Clause says that the failure to disclose the best method shall not apply in the case of a Section 91 application, because the man cannot disclose the best method known. The right hon. and gallant Gentleman explained that it was

intended to put the foreigner in the same position as the Englishman. The Englishman is entitled to introduce a legitimate expansion of his provisional specification, and it is highly desirable that he should be allowed to do so. We do not want to sterilise his invention at the moment when the provisional specification is presented because we want him to go on developing it and perfecting it and finally to publish it in the complete specification. In precisely the same way it is thought desirable and necessary to permit the same expansion between the document originally deposited by the foreign inventor in the foreign country, which is equivalent to a provisional specification, and the document which he deposits in this country as the complete specification.
The hon. and learned Member will find in the Patents Reports a decision of one who was once a Solicitor-General explaining why that is consistent with the Act as it stands. Unfortunately other people have taken other views, and this does appear to be a very good opportunity for clearing up this point. There can be no doubt that consistently with the underlying ideas of the Convention itself there should be such an opportunity for expansion, nor can there be any doubt that it is to the advantage of this country to get that disclosed in the complete specification, which adds to what may have been in the original document the development which has taken place since. Any other system of dealing with those two documents leads to the sort of anomalies which we are trying to cure in Clause 3. I suggest to the hon. and learned Gentleman that he will find that in the profession it is considered that the best way of curing the anomalies is to put a Section 91 application upon the same basis as an ordinary application.
Those are the two main points with which I want to deal, but in conclusion I should like to mention two others. One arises under Clause 5. As the right hon. and gallant Gentleman said, this Clause is introduced to do away with an anamolous position which might arise, but I would point out that there are many other anomalous positions, of which I have sent him details, and therefore I feel that the Clause must be made rather broader if it is to be included at all. It may be that what the Clause does is sufficient to satisfy the Convention, but it


is not sufficient to satisfy common sense, and if we are to satisfy the Convention we should also satisfy common sense at the same time.
On Clause 6 an important if minor question arises over the drafting. It is a Clause intended to get over a difficulty as regards interpreting what the invention is for which protection has been applied for in a foreign country, because that forms the basis, under Section 91, of an invention that can be obtained in this country, and this Clause might very desirably make it clear that one can refer to the whole of the documents put forward at the time of the application in order to find out what the invention is. Unfortunately the Clause repeats the words "the invention disclosed" which have always presented a difficulty. I suggest that we might make the Clause say that "regard would be had to the whole of the documents put forward at the time" or to "the disclosure contained in the whole of the documents." Either of those phrases would be very suitable phrases, and would get over "the invention disclosed" objection, which will only raise again the very difficulty which this Clause is seeking to get over. With those observations we here can support the Second Reading.

12.53 p.m.

Sir A. Wilson: As a humble layman who has some practical interest in the Patents and Designs Act from the point of view of designs may I draw the attention of the right hon. Gentleman to "the prescribed fees"? There is a general feeling in commercial circles, particularly in regard to textiles, that the fees charged are too high. The Patents Office is running at a profit and has a considerable margin to play with, and I am not by any means clear from the text of the Convention or this Bill whether the whole intention of the Bill and, indeed, of the Convention, might not, so far as textile designs are concerned, be largely nullified by the charging of excessive fees. I am credibly informed that for some time past there has been a tendency for textile designers, and other than textile designers, not to register their designs in this country simply because the number of designs to be registered is so large and the cost is so high that it is simply not worth while. To register them involves disclosure.

Copies can be obtained from the Patent Office. They can be sent by air to distant countries and they can be in foreign countries long before anybody has had time to trace them and take the requisite steps. I hope the Government will seriously consider whether the fees are not at present excessive and should be scaled down; otherwise whether it is possible or probable for the various governments principally concerned under the Bill to nullify its intention.
There are excessive fees, particularly in regard to textiles and other industries which are in the habit of registering large numbers of patterns and would be very glad of the protection afforded by the Bill. I refer to embroideries, textiles, and the innumerable small designs which have a transient interest in the trade, and of which one may have to register 300 or 400 in the name of a single firm in the course of 12 months. The actual fees are not prescribed by the Bill. They will be prescribed in due course by the Board of Trade. I hope that when the Bill goes through the Government will give further consideration to this matter, which, from the purely commercial point of view, is of considerably greater interest than some of the technicalities which have been referred to and which deal largely with the heavy and mechanical industries.

12.57 p.m.

The Solicitor-General (Sir Terence O'Connor): May I also express my gratitude to the hon. and learned Member for East Bristol (Sir S. Cripps) for his courtesy in giving notice of points among which he ranges with a much greater facility than any Member of this House can hope to command. I am rather in the position of the blind leading the blind, because I do not pretend to any detailed or specific knowledge of this branch of the law comparable to that which is possessed by the hon. and learned Gentleman. He has been good enough to put his suggestions in this form, and I think it was clear to the House when he addressed it that they fall for consideration between now and the remaining stages of the Bill. It would be appropriate that they should receive a more detailed examination during that interval than I propose to give them now, but they deserve some immediate observations upon one or two points.
It is right that the House should know what exactly Clause 1 is devised to do. It is devised pursuant to the recommendations of the proposed Convention that the inventor has the right to be mentioned as such in the patent. According to our law he normally is, but there are one or two cases in which he is not. What is proposed in this Clause is merely something which will give personal gratification to the inventor and enable him to take personal credit, but it does not affect rights or interests of a pecuniary or a financial kind. These improvements relate to only a very few cases. The argument put forward by the hon. and learned Gentleman rather assumed that sanctions should be applied of a more stringent character, which I think would be appropriate in cases where the public interest was concerned, but not quite so appropriate or necessary in cases where it was desired to insist upon mention of the name of the inventor for personal gratification. The proposal that the hon. and learned Gentleman made was a stringent one and, at any rate as at present advised, we do not think it would be right to apply the stringent sanctions which he suggests to cases in which the only desire is to include the name in the patent for the personal gratification of the inventor.

Sir S. Cripps: It is not a question of stringent sanctions. The sanction is that an applicant must not make a false statement when he applies. If you ask him to say who was the deviser of the invention he must tell the truth. There is no stringent sanction about that.

The Solicitor-General: He is under considerable penalty if he makes a false statement.

Sir S. Cripps: He does it, anyway.

The Solicitor-General: We think the suggestion goes farther than we can go under the present Convention or than is necessary for this comparatively small modification of the law. On one point I agree entirely with the hon. and learned Gentleman. In so far as the Clause provides that the inventor and deviser is entitled to be mentioned in the patent, it does not set out what we intend to do. As the hon. and learned Gentleman said, it is not a public document, and the Government will be willing on the Committee stage to accept an Amendment to provide that it should appear in the

register. I am told that that would be a better way of achieving the object. The register is open to public inspection.

Sir S. Cripps: Surely the document which everybody buys at the Patent Office and which everybody sees, is the specification. People do not see the register unless they go for some particular purpose to inspect it.

The Solicitor-General: We recognise the force of the point but, as I am at present advised, the better way would be to include it in the register. Our desire is to give effect to the point. As for including a Clause which would enable the true inventor to obtain all the glory there is from this matter, we should be willing to see that one is put forward in the Committee stage on behalf of the Government. The hon. and learned Gentleman made some observations about the cumbrous nature of the Clause, but that is more apparent than real. Subsections (2) to (8) of the Clause are little more than machinery. It would be equally possible to have put in some formula such as "according to rules to be made by the Board of Trade, who have ample power to make rules dealing with all these matters. We think that we are entitled to take the credit for having put the machinery into the Bill rather than driving people, because of a provision in the law, to look at the rules made by the Board of Trade.
What the hon. and learned Gentleman said about Clause 3 will be given careful consideration between now and the remaining stages of the Bill. I do not think it would be fair to him, as he has given notice to me of the points and as he developed them here, that I should leave him under the impression that, as at present advised, we think that the alteration which he proposes is desirable. One of the more beneficent changes which have occurred from the point of view of the Law Officer at the moment was made during the occupancy of that office by the hon. and learned Gentleman. It is that Law Officers are not now called upon to adjudicate in patent cases, and no one is more grateful for that than the present holder of the office of Solicitor-General. Looking over the then powers of the hon. and learned Gentleman, I find that there was one thing in regard to which I envy him, and that was that


he apparently possessed a power to overrule a tribunal of equal jurisdiction with himself. The decision of a Law Officer to which he referred must, I think, have been his decision, and it overruled a decision which was given by my right hon. Friend the Chancellor of the Exchequer, who was a Law Officer at the time, and which had been acted upon as being the law ever since the Act of 1901. The then existing view of the law had a considerable historical background, dating back to the Fry Commission of 1901 and the Amendments subsequently embodied in the Act of 1901 relating to the period of 12 months and so on.
The hon. and learned Gentleman's argument was, I think, based upon a premise that was not entirely sound. He assumed for the purposes of his argument that there was in foreign countries, speaking generally, the same kind of procedure with the same stages that exist in this country, namely, that there was something akin to an application for provisional protection in a foreign country, which was subsequently amplified by a more complete specification. I am informed, as a result of the investigations that have been made into this matter in the limited time we have had, that that is not so except in the case of Australia and possibly one other country; although there is in Germany, for example, a procedure which may be said to be somewhat analogous, by way of amendment of the original specification. I am aware of that because I have read the decision to which the hon. and learned Gentleman was referring, in which he treated such Amendments as being analogous to our procedure between the provisional and the complete specification. That view did not commend itself to Mr. Justice Luxmoore when, on similar facts, he arrived at conclusions which were different from those of the hon. and learned Gentleman.

Sir S. Cripps: The Solicitor-General will appreciate that my argument just now was not on the basis that that was the law already, but that it ought to be put into that position, and that this is the opportunity for doing so.

The Solicitor-General: I am sure the hon. and learned Gentleman realises that it is not an easy matter for one comparatively unskilled in these matters to explain, and the practice of inviting people

outside the House to do so is one which is not to be followed, because it leads sometimes to consequences which are not desirable. Perhaps I may attempt, so that the House may be seized of the point we are discussing, to summarise what in my view is the present position, and the reasons why we should alter the law as we are doing in Clause 3 of the Bill. Normally, according to Section 25 of the existing Patents 'Act, revocation of a patent may be obtained on the ground that the complete specification does not disclose the best method of performance of the invention known to the applicant for the patent at the time when the specification was left at the Patent Office. We are dividing that up, leaving that state of the law still applicable as regards applications for patents which originate in this country, but, as regards applications for patents which were first made in a foreign country, we propose to provide that the relevant moment at which the applicant's knowledge must be tested is the time when the application was made in the Convention country. The hon. and learned Gentleman says, as I understand it, that between the time when the application is made first in the Convention country and the end of the 12 months within which it may be made in this country, the invention may have been expanded or amplified, corresponding with the difference between the provisional and the complete specification here, and, as I understand the hon. and learned Gentleman's argument, the advantage of the—I do not quite know how to describe it, but may I say the ampler development—

Sir S. Cripps: Legitimate development.

The Solicitor-General: —of that legitimate development of the process should be taken into account in fixing the moment of knowledge which is relevant. The view that we are disposed to hold at the moment is that that is based upon a false conception of the methods according to which these applications are made in other countries, and that in fact there is no analogy between the procedure here and the procedure in other countries of the kind that the hon. and learned Gentleman suggests. When the application falls to be made in another country, it falls to be made on the same basis on which application with a complete specification will be made here. That is the view that


we hold at the present time. If it be right, then the test that we propose in the Bill would be an appropriate test. I am not, however, entirely closing the door on the matter; I am only saying to the hon. and learned Gentleman that that is the view which at the present time we are inclined to take on this proposal.
The hon. and learned Gentleman made a point with regard to Clause 5. I do not pretend that at the moment it is a very logical structure, and, if he puts down Amendments to it, we will consider them. It is, however, as far as we are required to go by the Convention. With regard to Clause 6, he raised what I think was an important point, that there should be some modification of the words following line 5 on page 6, which refer in terms to the invention disclosed in the documents. I think he is entitled to expect us to consider that point during the Committee stage. For these reasons, recognising that we shall perhaps have to give close attention to one or two of these points, but that no attack in principle has been made on the various provisions of the Bill—[Interruption.] I am told that the question of Designs fees does not come under the Bill at all, so I hope my hon. Friend will forgive me if I do not reply specifically to the points he has raised about them, although they enter into the consciousness of the Government and, no doubt, will be considered by the Treasury.

Sir A. Wilson: Who prescribes the fee that the Bill says will be prescribed?

The Solicitor-General: I presume the Board of Trade, in conjunction with the Treasury. For those reasons, I hope the Bill will now have a Second Reading.

Question, "That the Bill be now read a Second time," put, and agreed to.

Bill read a Second time, and committed to a Standing Committee.

MILITARY MANOEUVRES, 1938
(MILITARY MANOEUVRES ACTS, 1897 AND 1911) (ORDERS IN COUNCIL).

Resolved,
That an humble Address be presented to His Majesty, praying His Majesty to make three Orders in Council under the Military Manoeuvres Acts, 1897 and 1911, drafts of which were presented to this House on the 1st day of February last."—[Sir V. Warrender.]

To be presented by Privy Councillors or Members of His Majesty's Household.

POST OFFICE (SITES) BILL.

Sir Edmund Findlay, Mr. MacLaren, Mr. Mander, and Mr. Rowlands nominated Members of the Select Committee on the Post Office (Sites) Bill.—[Mr. Furness.]

The remaining Orders were read, and postponed.

Whereupon Mr. DEPUTY-SPEAKER adjourned the House without Question put, pursuant to Standing Order No. 2.

Adjourned accordingly at Seventeen Minutes after One o' Clock, until Monday next, 11th April.